MACPA Professional Issues Update

Regulatory Edition

By: Tom Hood, CPA, CITP, CGMA

May 3, 2012 Columbia, MD

The history of associations – Why do we exist?

Bill of Rights - submitted to the states for ratification on September 25, 1789 and adopted on December 15, 1791

The CPA •  Education (150 hours)

•  Examination – Uniform CPA Exam

•  Ethics – Separate Ethics Exam

•  Experience – 2,000 hours of practical experience

And CPE – - 80 hours of Continuing Professional Education reported every two (2) years, including four (4) hours of ethics training

30 Future Forums 1,000 CPAs

Identified these top trends

What CPAs think about the future

http://www.bizlearning.net/live/i2afutureforums

• Change • Complexity • Compliance • Convergence • Competition

MANAGING THE SEA CHANGE

6 6

What is the #1 reason organizations fail?

7

Complexity “the biggest challenge facing enterprises from here on will be the accelerating complexity and the velocity of a world that is operating as a massively interconnected system.” 79%

51%

6,000 pages 500 Million words

17,000 pages

The CPA Profession and CPE

How is your knowledge inventory?

Compliance

11

When do we think about infrastructure?

Federal Laws & Regulations

State Laws & Regulations

Professional Standards

Our infrastructure for regulating the US

financial markets has been created from a series of reactions to

crises and changes and is in need of repair.

Single audits

Audit quality

Financial Regulatory Reform

Sarbanes-Oxley Act Dodd-Frank Wall Street Reform and

Consumer Protection Act

MD Comptroller MD Comptroller

CAQ

US Treasury

MD Comptroller

Courtesy of the Maryland Association of CPAs – 2008 edition Drawing by Carol Kirwan, CPA

Cascade

“a series of steps or stages that, once initiated, continues to the final step because each step is triggered by the preceding one, resulting in amplification of the signal, information, or effect at each stage.”

Where do major changes come from? Most changes come from regulators and standard setters

Us – Associations MACPA & AICPA

OR

Them – Federal & State legislators Infrastructure

New laws, regulations & regulators

17

Sarbanes-Oxley Act of 2003

18

Dodd-Frank - the bill that keeps on giving

CPAs required to register as debt settlement advisors

•  Accountancy bills (20 states) - 51

•  Auditor Rotation (3 states) - 8

• Mobility (2 states) - 6

•  Regulation of Tax Preparers (3 states) - 5

•  Tax on Accounting Services (6 states) - 11

•  Peer Review (4 states) - 7

•  State Board Consolidation (6 states) 8

State Legislation and Regulatory

Maryland & Federal Tax Preparer Law Threats to your CPA License

•  Well intentioned consumer group •  Solving a problem – low income tax

frauds •  But…creating problems for CPAS

–  Licensed / Certified Tax Preparers would be confusing to the public

–  Tax Preparer Exam using ACAT / H&R Block designation (ATA, ATP) opens door for second tier license

–  Misinformation / confusion

Example - CPA Mobility and uniformity achieved through collaboration in profession

TX

WA

OR

CA

NV

ID

MT ND

SD WY

UT

CO

AZ NM

HI

OK

KS

NE

MN

IA

MO

AR

LA

MS AL *GA

FL

WI

IL

MI

IN

KY

TN

SC

NC

VA

OH

NY

ME

CT RI

*MA

AK

WV

NJ DE

DC

MD

*PA

CPA Mobility Enacted 48

CPA Mobility Enacted Only for Other Mobility States – GA, PA, MA

*

In Process

NH

CPA Mobility Legislation Pending - DC

VT

PR

GU

U.S. VIRGIN ISLANDS

21

•  Collaborative effort with AICPA – CPA/SEA – NASBA & State CPA Societies

•  48 + DC states passed legislation in four (4) years •  Maryland enacted it in 2008

22

Tsunami of 1099K and info returns

23

CPAs in Tax The increase in IRS activity is swamping our tax practitioners and costing them hundreds of hours in chasing down IRS notices.

Maryland - 1099R - 2008

Maryland joins AICPA & States supporting government employee meeting attendance

24

More than 100 MACPA members call our senators and we defeat the amendment!

The DATA Act

26

State  Legisla+on  

CPA Day in Annapolis – January 16, 2013

An example - CPE Regulations involved all levels – law, regulations, and procedures

Maryland Senate & House passes bill

A Bill SB 128 From State Board

Law Maryland Governor signs into law

Maryland State Board of Public Accountancy

Clarify thru regulations And enforce the law

State  Legisla+on  

Maryland’s  fiscal  crisis  

Maryland  Regulatory  Update  

•  CPA  Exam  Applica+ons  –  delays  up  to  120  days  

•  CPA  Exam  Applica+ons  –  reasons  for  decline  •  New  safe  harbor  regula+ons  for  complila+ons  •  Record  reten+on  •  Commissions  &  referrals  fees  •  CPA  licensing  Fee  reduc+ons  

Top  reasons  for  CPA  Exam  denial  1.  Not  reading  and  following  the  direc+ons  for  submiLng  the  applica+on  (#1  reason  for  DELAY)  2.  Not  comple+ng  the  applica+on  completely  and  accurately  3.  Not  lis+ng  ALL  names  the  applicant  has  used  in  the  past  and  present.  4.  Not  lis+ng  ALL  transcripts  on  the  online  applica+on.  5.  Not  having  ALL  official  transcripts  sent  directly  from  ALL  schools  the  applicant  has  aWended.  We  DO  NOT  

accept  transfer  credits;  we  must  have  the  official  transcripts  from  EACH  school.    6.  Not  reques+ng  transcripts  for  other  credits/exams  taken-­‐  AP,  CLEP,  DANTES  ACE  etc.  These  credits  must  

ALSO  appear  on  a  regionally  accredited  schools  transcript  listed  with  +tle  and  credits  granted  for  the  exam.  If  they  are  listed  in  a  lump  sum  we  must  receive  a  leWer  from  the  school  explaining  the  course(s)  the  exams  were  accepted  for.    

7.  Not  submiLng  course  descrip+ons  and  course  syllabi,  especially  for  courses  taken  from  out  of  state  schools.  If  the  +tle  of  the  course  doesn’t  match  a  +tle  shown  on  our  educa+on  requirements  we  must  have  the  course  descrip+on  and/or  syllabi  from  the  catalog  for  the  year  you  took  the  course.  

8.  Not  comple+ng  the  curriculum  checklist  completely  or  not  comple+ng  it  accurately.  9.  Not  having  a  course  by  course  evalua+on  done  for  the  purpose  of  taking  the  Uniform  CPA  exam  in  

Maryland  by  a  current  NACES  member  of  any  and  all  foreign  educa+on.  10.  Income  tax  not  taken  in  the  US  does  not  qualify  for  US  Federal  Income  Tax.  11.  You  have  not  taken  a  three  semester  credit  hour  course  devoted  en+rely  to  ethics.  NOTE***A  U.  S.  

Business  Law  course,  a  Law  and  Ethics  course,  an  audi+ng  and  ethics  course,  etc.  does  not  meet  the  requirements  for  ethics.    

12.  Have  not  received  a  conferred  bachelor’s  degree.  13.  Filing  an  applica+on  before  you  have  completed  all  of  the  requirements  will  result  in  a  denial  of  your  

applica+on.  

 

Safe  Harbor  =  6/1/2012  

.10  Compila,on  Repor,ng  Language.  A  compila*on  does  not  cons*tute  the  prac*ce  of  cer*fied  public  accountancy  if  the  compila*on  report:      •  Includes  the  statement  “The  preparer  of  this  report  has  not  

undergone  and  is  not  required  to  undergo  peer  review”.      B.  Does  not  reference  the  Statements  on  Standards  for  Accoun*ng  and  Review  Services  issued  by  the  AICPA.    

 

Record  Reten+on  Furthermore, the interpretation now allows a member to contract with a client in advance as to which member-prepared records or member’s work products constitute client records and therefore will be returned to the client. Finally, guidance pertaining to electronic records was revised to clarify that members are to provide records in a requested format if such records are available in that format and are within the member’s custody and control. However, if an electronic record contains formulas, the member can elect to provide the record without formulas unless the member was engaged to provide such formulas with the work product.

Your  license  –  inac+ve  vs  expired  •  One  of  the  most  essen+al  things  you  should  know  about  your  Maryland  

CPA  license  is  that  your  license  expira+on  date  never  changes.  Once  it's  set,  it  stays  with  you  throughout  your  professional  life  as  a  CPA.  Even  if  your  license  is  placed  on  inac+ve  status,  or  if  you  haven't  renewed  on  +me,  the  month  and  day  of  your  expira+on  date  will  always  remain  the  same.  

•  Therefore,  it  is  very  important  to  consider  your  license  expira+on  date  if  you  have  an  inac+ve  or  an  expired  license.  If  you  apply  to  the  Board  to  reac+vate  or  reinstate  your  license,  your  fees  and  80  CPE  hours  will  only  apply  to  the  remaining  length  of  your  current  two-­‐year  term.  So  if  you  apply  to  the  Board  three  months  before  your  term  is  set  to  expire,  you  will  only  be  covered  for  those  three  months.    

•  Firms  Permit  -­‐  as  a  sole  prac++oner  is  not  required  to  hold  a  permit,  even  if  the  individual  chooses  to  organize  the  business  as  a  corpora+on  or  a  limited  liability  company.    

Maryland  fees  effec+ve  6/1/2012  •  CPA  Exam  

–  (1)  Audi+ng  and  AWesta+on  —  $[249]  200;    –  (2)  Financial  Accoun+ng  and  Repor+ng  —  $[237]  200;    –  (3)  Regula+on  —  $[211]  180;    –  (4)  Business  Environment  and  Concepts  —  $[198]  180;    

•  Licensing  Fees  –  Renewal  fee  —  $[80]  50;  for  two  years!  –  Applica+on  for  inac+ve  status  —  $[40]  25;    –  Renewal  for  inac+ve  status  —  $[40]  25;    –  Reinstatement  for  inac+ve  status  —  $[60]  50;    –  Reac+va+on  from  inac+ve  status  —  $[80]  50;    –  Reinstatement  of  expired  license  —  $[120]  100;    –  Firm  applica+on  fee  —  $[80]  60;    –  Firm  permit  fee  —  ${80]  60;    –  Firm  renewal  fee  —  $[160]  120;    –  Firm  reinstatement  fee  —  $240;    –  [Proctoring  fee  —  $75]    

 

37  

KEY

GOALS/ RESULTS

PROJECTS/ STRATEGIES

PRODUCTS/ SERVICES/

SITES

PEOPLE

KEY EVENTS

Dateline 1900 1987 1974 1976

In the Beginning...

MACPA stops

several

attempts to

amend 1924

law

Maryland becomes the 1st state to restrict

practice for CPAs

1901

Larry Kamanitz chairs

Legislative Committee

MACPA tries

to pass CPE

Bill in 1974

& 1975

AG opinion of 1981 Grants rights to non-CPAs for Reviews &

Comps.

Max Teichman, Frank Blacklock & William Rogers

Interstate Practice &

Uniform Accountancy Act

HB 1296

Mobility Passes

• CPA Bill signed April 10, 1900 • MD is 3rd state (NY & PA)

1922 1924 1981

Non-CPAs begin

attempts at 2nd

Tier license

2005

HB 1261 re-writes CPA Law - 1986 MACPA amendments to ed requirements fail

Dawson Grove chairs

Legislative Committee

Allen Deleon chairs

Legislative Committee

1993 MACPA passes

MD LLC & LLP Acts

Rights & Recognition • Privilege of Self-

Regulation • Right to Sole Control

over an Area of Practice

History of CPA Legislation

1993 2006 2003 2007 2008 2001 1999

SB 560 Defeated Maryland Corporate

Accountability Act MACPA requests

reversal of AG Opinion – “This is not an audit”

language added

Terry Hancock chairs

Legislative Committee

MACPA Forms Task Force and surveys members

88% Sub Equivalency 76% Peer Review & Safe

Harbor 68% Non-CPA Ownership

State Board of Accountancy

formed

Maryland Special Session

Oct – Nov 07

MACPA defeats Sales Tax on

Services

Amended Corporate Tax Reporting Bill

MACPA wins use of “consultants” in firm letterhead at State

Board

Accounting Reform

task Force addresses

SOX State Board Hearing

May 1, 2003

MACPA passes new simpler CPA exam

Education Rules

Maryland Association of CPAs

38 38

Convergence

Public Company

Private Company

Int’l Company

Financial Reporting

Auditing

Ethics

State Boards of Accountancy

Private Company Standards Decision Due May 24th

41

Auditor Rotation Cascade!

Federal Accounting Standards

The CPA Brand

The

43

44

Why MACPA?

45

46

Connect – Connecting you to your Profession

Connecting the pipeline of CPAs

47

http://www.facebook.com/TomorrowsCPA

Students CPA Candidates CPAs

Protect – Protecting the CPA License & Public Interest since 1901

48

49

Achieve – Achieving Success as a CPA

It really is about this...

MANAGING THE SEA CHANGE���Be the Captain of your own ship!

• Continuous Learning

• Competency • Collaboration =

Career Success

52

3 Critical Workforce"Priorities Rapidly developing workforce skills and capabilities Fostering collaboration & knowledge sharing Developing future leaders

Entry-level Staff

Supervisor

Manager

Controller

CFO

Critical Turning Point

54

The collaboration curve replaces the experience curve

“The organizations that will become the household names of this century will be renowned for sustained, large-scale, efficient innovation.

The key to that capability is neither company loyalty nor free-agent autonomy but, rather, a strong collaborative community.” HBR, July-August 2011

Associations in America were seen as unique from the foreign perspective

As soon as several of the inhabitants of the United States have conceived a sentiment or an idea that they want to produce in the world, they seek each other out; and when they have found each other, they unite. From then on, they are no longer isolated men, but a power one sees from afar, whose actions serve as an example; a power that speaks, and to which one listens.

– Alexis de Tocqueville

Alexis de Tocqueville 1835

57

A leader’s job is to set context and provide hope and inspiration..."

Tom  Hood,  CPA.CITP  CEO  

Maryland  Associa8on  of  CPAs  Business  Learning  Ins8tute  

(443)  632-­‐2301  E-­‐mail  tom@macpa.org  

Web  hNp://www.macpa.org  Blog  hNp://www.cpasuccess.com